Recuperating investment from profit...

[Ty Korrigan]

Investment is paid by the profit I make. So for instance does a simple sum like this make sense?

I have materials costing 10k with a life of 10 years, which in 10 years will cost 13k to replace.

So to pay for this, must I earn 13k plus the tax on the profit? ( say 50%) so in fact to replace my 10k investment requires 19.5k of actual taxable profit.

What say the learned...?

[Poppy]

Did you foget the cost of maintenance and replacement/labour for parts over ten years or does your equipment run trouble free for that number of years.

We understand and sympathise fully.

Jan

[Ty Korrigan]

Hello, please just assume these are values of investment only.  Other costs are irelevant for my example Ta very much!

[Outback]

There is also the "opportunity cost" of not investing your

money in something else. If you were working for someone

else and using their kit you would have been able to invest

the money instead , at least in an interest bearing account

and probably even get a better return with shares and the

like. This is in effect the "hire charge" for the money which

you should be hiring to yourself for at least the same as the

lowest return you could get elsewhere.

Also don't forget to account for end of term residuals and

capital allowances which should be available even in France

BTW Don't want to sound pedantic but it's "recouping an

investment", recuperating is what you do after an illness.

[Mpprh]

Hi

A simple example, but not so easy to answer !

Normal accounting standards would depreciate the 10,000 cost over the 10 years and ignore replacement cost. It would also ignore inflation. This is the basis for taxation (subject to any accelerated capital allowances available).

To analyse this project, you would probably use Discounted Cash Flow analysis. This reflects the cost of capital, and measures the +ve flow at the end of the project. It is normally used with a cut off for investment decisions or in comparisons with various available projects.

You can IM me for more information !

Peter

 

 

  

 

[Ty Korrigan]

Ah! 'recouping' abit like re-home-ing a chicken then!

I shall e-mail for further info... after I have cut more grass with some of my investment!